Hong Kong May Extend Property Stamp Duty Increase

by Mary Swire, Tax-New.com, Hong Kong

23 April 2010

In a speech at the Legislative Council, the Financial Secretary, John C Tsang, has said that the government will keep a close watch on the state of Hong Kong’s property market and will extend property taxes if necessary to reduce property speculation.

In the budget in February this year, so as to increase the cost of property transactions and curb possible speculation in the luxury flat market, John C Tsang increased the rate of stamp duty from April 1 on transactions of properties valued more than HKD20m (USD2.6m) from 3.75% to 4.25%, with buyers no longer being allowed to defer payment of stamp duty on such transactions.

He now reported that, while he appreciated public concern over the rise in property prices, the “upward momentum in residential property prices in Hong Kong has tapered slightly in recent months.” The rise in overall apartment prices slowed from 2.5% in January to 1.1% in both February and March.

However, he said that “the increasing risk of a property bubble cannot be ignored.” He confirmed that the government would continue to “closely monitor the property market and the overall economy, and introduce timely and appropriate measures to ensure a stable and healthy development of the property market.”

In that regard, if the monitoring of the trading of lower-valued properties showed there was excessive speculation in the trading of those properties, he said that he would consider extending the budget’s measures to transactions of properties valued at or below HKD20m.

He also reminded his audience that the Inland Revenue Department (IRD) will closely follow up all cases involving speculators profiting from property speculation, and will levy profits tax on the persons or companies earning profits arising from such transactions.

“The IRD,” he added, “maintains a huge database where details of all property transactions are recorded. To identify cases of possible property speculation, a computer selection is run periodically to analyze the sale and purchase transactions in the database.”

“In 2008-09, for example, there were over 13,000 suspected speculation cases identified by the computer program,” he confirmed. “More than 4,000 cases required follow-up action after being reviewed by IRD officers. If it is proved that the cases involve speculation, the IRD will recover profits tax from the persons or companies involved.”

Recommended